Children’s Place announces financing agreement with Mithaq Capital

The Children’s Place announced a new financing agreement with its majority shareholder Mithaq Capital to provide $78.6 million of interest-free, unsecured and subordinated term loans to strengthen the Company’s liquidity position. The Company also announced the appointment of four persons nominated by Mithaq to its Board of Directors: Turki Saleh A. AlRajhi, Muhammad Asif Seemab, Muhammad Umair and Hussan Arshad. In conjunction with these appointments, current directors Elizabeth Boland, Alicia Enciso, Katherine Kountze and Wesley McDonald have resigned from the Company’s ten-member Board. Mr. AlRajhi has been appointed Chairman-Elect and is sharing the Chairman’s duties with Norman Matthews during a transition period. Additionally, the Board has formed a special committee – the Efficiency and Optimization Committee – comprised of Mithaq appointees Mr. Seemab and Mr. Umair, as well as Jane Elfers, President and CEO and Director. The purpose of the Committee is to identify and make recommendations to the Board with respect to increasing business competitiveness and the efficient cost management at the Company. Pursuant to the financing agreement, Mithaq provided an initial tranche of $30 million to the Company on February 29, 2024, in the form of an interest-free, unsecured and subordinated term loan. Mithaq will also provide an additional $48.6 million interest-free, unsecured and subordinated term loan to the Company on or before March 29, 2024, subject to certain conditions. Upon funding of the Second Mithaq Term Loan, at least four of the remaining non-Mithaq appointed directors will resign and directors appointed by Mithaq will comprise a majority of the Board of Directors. The Company has secured certain minority shareholder protections. In addition, the governance agreement require supermajority Board of Directors authorization for certain actions to be taken by the Company during the initial transition period. The Company expects to be in a position to close the previously announced $130 million term loan in March 2024, as contemplated by the non-binding term sheet that the Company entered into with 1903P Loan Agent, LLC, and is continuing to pursue alternative financing on terms no less favorable in the aggregate to the Company. As the Company continues to work to improve its liquidity position and strengthen its balance sheet, certain of its vendors and service providers material to the business have informed the Company that they have halted or plan to halt service to the Company as a result of delayed payments. The Company is in ongoing dialogue with its vendors and service providers regarding paths forward to ensure continued service, and plans to use a portion of the proceeds from the financings described above to support operations, including payments to vendors and service providers to address overdue accounts payable. As previously disclosed, Mithaq’s acquisition of the Company’s common stock triggered a change of control, thereby causing a default under the Company’s Amended and Restated Credit Agreement with its bank lenders. As a result of this default, the Company is currently subject to cash dominion. The Company and its bank lenders have agreed to a forbearance agreement that, among other things, permits the Company’s entry into the Mithaq Term Loans and pursuant to which the bank lenders have agreed to forbear from exercising certain rights and remedies under the Credit Agreement with respect to the above-mentioned default during a limited forbearance period. The Forbearance Agreement contemplates a permanent waiver of the change of control default upon the satisfaction of certain conditions, including the Company’s receipt of proceeds from the financings described above.